Power tariffs may jump as generators push up quotes

Average tariff being quoted by power generators has shot up by almost 50% in 18 months, say experts

MUMBAI: Customers may have to pay more for their electricity bills as power generators are quoting higher prices to sell bulk power to distribution companies, taking a cue from their past when their inability to pass on higher cost of fuel dented profits.

Uttar Pradesh Power Corporation opened financial bids for its tender to buy 6,000 megawatts late Monday. While the average tariff quoted by generators was Rs 5-6 for every unit, the highest tariff was as high as Rs 7.11, people close to the development said. Experts said that the average tariff is almost 50% higher than the average rate quoted by generators around 18 months back and fear this may be the trend for bids, going ahead.

"Power generators are calculating their bid tariff based on worst case scenarios after having burnt their fingers in the past. If the uncertainty on availability and price of coal is not reduced, power tariff will continue to be high," said Ashok Khurana, director-general of Association of Power Producers. Fuel accounts for almost 70% of the generation cost for a company.

But at the time of bidding , many developers quoted lower charges for escalation in fuel prices to make their bids more competitive. Power utilities like Tata Power, Reliance Power, Adani Power, among others, have been struggling to increase their power tariff to pass on the additional burden arising from the increase in fuel cost. Since state-run Coal India has not been able to meet the demand of power utilities, it has been buying coal from foreign shores and shortterm domestic market, which has increased the cost of fuel and impacted profits.

"Two-three years back, private utilities were extremely exuberant and offered low tariff to get projects. The environment has changed and they are extremely negative and cautious," Khurana said, explaining the rationale behind the increase in tariff bid. UPPCL received 16 valid financial bids, the lowest coming at Rs 4.88 for every unit from NSL Power's Orissa unit, and the highest from Diligent Power at Rs 7.11.

The state power board had invited competitive bids to tie up a total of 6,000 mw of power for 25 years, beginning 2016-17. The bid was conducted through 'case I' route where the procurers only specify the quantum and period for power supply, while it is up to the power supplier to choose and arrange for land, technology and fuel.

The power generators offered different quantum of power, with the highest of 2,800 mw being offered by Indiabulls Power, partly at Rs 5.97 and partly at Rs 6.30 from two of its plants. "The rates quoted by generators are very high and UPPCL may find it very difficult to tie up the entire 6,000 mw, given their weak financial health. The state is facing power deficit, but it's very difficult for it to increase retail tariff," a senior industry executive said.